While consumers’ fears about inflation slowed the growth of discretionary spending in 2022, a new report shows discretionary spending levels remained positive throughout the year and ticked slightly higher in the first few months of 2023 — a good sign for the economy and the retail industry.
That growth, however, was not evenly distributed, according to research from Commerce Signals, which tracks the spending of 40 million U.S. households through Visa and Mastercard credit cards and debit cards.
- The biggest gains in early 2023 were in the travel industry, where dollar spending rose 34.5% year over year in January and February.
Dollar spending climbed 6.3% at apparel retailers in the first two months of this year and rose 6.0% at department stores.
Electronics stores saw consumer purchases decline 2.6% in dollars in January and February, despite a 10.4% increase in the number of transactions. Commerce Signals attributed the decline in dollars spent to a drop in big-ticket purchases such as computers and a rise in less-expensive areas such as gaming.advertisement
Best Buy, the largest pure retailer in the electronics category, saw purchase dollars fall 19%, while transactions were down only 5.3%. Its online sales fared worse than in-store sales, Commerce Signals said. Best Buy Co. Inc. ranks No. 7 in the Top 1000.
“People are really spending a lot in travel, all aspects of travel — airlines, hotels, rental cars. You see it in the travel agent and online travel agencies. And so we do expect that to continue,” Nick Mangiapane, chief marketing officer and head of partnerships at Commerce Signals, told Digital Commerce 360. “Whereas categories that are specifically home-based are doing less well. Home stores, furniture stores, electronics are all down, and we are expecting that to continue, too.”
Commerce Signals’ data shows overall growth in retail spending at 5.5%-5.6% so far in 2023. That is in line with the National Retail Federation’s predictions of overall retail growth between 4% and 6% this year. Commerce Signals was purchased by TransUnion in April 2022.
Discretionary spending online vs. brick and mortar
Commerce Signals’ data shows a substantial gap between spending levels online and at stores.
Looking at year-to-date figures, Mangiapane said “there’s some variability by category. But we’ve actually got brick and mortar up 6.4% so far and online sales only up 4.4%.”
Dollar spending at department stores year-to-date is up 7.2% versus a year earlier. Meanwhile, dollar spending online at department stores is up just 4.1%.
Among electronics stores, the gap is also substantial. “In-store purchases are up almost 1%, while online purchases are down almost 4%,” Mangiapane said.
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